As Australian seniors consider their options for retirement income, reverse mortgages are becoming an increasingly popular choice. In this article, we explore what reverse mortgages are, how they work, and the current interest rates on offer.
What is a Reverse Mortgage?
A reverse mortgage is a loan that allows you to borrow money against the equity in your home, with the loan repaid only when the home is sold or the borrower passes away. This financial product is designed to provide retirees with additional income without requiring them to sell their homes.
How Does a Reverse Mortgage Work?
In Australia, a reverse mortgage can be an attractive option for those over the age of 60, as it allows you to release some equity from your home while continuing to live in it. You remain the owner of your home and can benefit from any potential increase in property value.
You can continue to enjoy your community and the comforts of living in your home for as long as you choose. There’s no requirement to make any loan repayment until the end of the loan, which usually happens when you sell the house, move into long-term care, or pass away.
Reverse Mortgage Eligibility
To be eligible for a reverse mortgage, you must own your home outright or have a significant amount of equity in it. The amount you can borrow depends on your age, the value of your home, and the home’s equity. Typically, the older you are and the more equity you have, the more you can borrow.
One key feature of a reverse mortgage is that you don’t have to make any repayments while living in your home. Instead, the interest is added to the loan balance each month, causing the amount owed to grow over time. When the home is sold or you pass away, the loan balance must be repaid from the sale proceeds. Any remaining equity goes to you or your heirs.
Reverse Mortgage Interest Rates
Like a standard home loan , reverse mortgage interest is calculated daily and paid on the last day of each calendar month. The BlueRock Finance team is currently seeing variable rates on reverse mortgages priced between 9.70% - 9.90% as of January 2025.
It’s important to know that interest will only be payable on the drawdown of the loan facility. The variable rate nature of the facility allows you to make voluntary contributions throughout the loan term to pay down the loan sooner.
How To Choose the Best Reverse Mortgage in Australia
When considering a reverse mortgage, it's important to explore different lenders and their offerings. Various financial institutions, including banks, credit unions, and specialist mortgage providers, offer reverse mortgages in Australia.
We recommend considering the following factors when choosing the best reverse mortgage. Of course, using a mortgage broker will help ensure you get the best deal without having to do a lot of the leg work yourself.
1. Reverse Mortgage Interest Rates:
Compare rates among different lenders to find the most competitive option.
2. Fees and Costs:
Understand the fees involved, such as application, valuation, legal, and ongoing fees.
3. Flexibility:
Some lenders offer options that include lump sum payments or a line of credit that you can draw down as needed.
4. Customer Service:
Evaluate the lender’s support and service quality.
Talk to Our Finance Brokers About a Reverse Mortgage Today
Reverse mortgages can be a beneficial financial tool for retirees who need additional income. They allow you to tap into your home equity without selling your home. However, it’s essential to fully understand how they work, consider the interest rates, and review the best options available.
If you're considering a reverse mortgage, consult with a mortgage broker at BlueRock to discuss your specific circumstances. We’re here to help you navigate your financial options and make informed decisions for your retirement.
Disclaimer: The information in this article is intended as general information only and should not be considered as advice on any matter and should not be relied upon as such. This information has been prepared without taking into account any individual objectives, financial situation or needs. You should therefore consider the appropriateness of the information before acting or seek advice before making any financial decisions.
